Corporate America Discovers Payments - Digital Transactions

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and purchase e-greeting cards andvirtual items for Facebook games.Every time a Facebook member buysFacebook Credits, Facebook getspaid. Every time a Facebook memberspends Facebook Credits, the ownerof the Facebook application where thecredit is being spent gets paid.“The key for Facebook in paymentsis going to be how well theyencourage developers to create newtransactional applications that allowmembers to perform the type of transactionsand activities they want, ratherthan Facebook deciding what to offermembers,” says Mott. “Apple hasshown the way to excite the developercommunity with the iPhone,which builds consumer excitementfrom the bottom-up. The top-downapproach is not going to work wellfor Facebook.”Amazon’s All-InclusiveEcosystemFor years, Amazon.com has been strivingto reinvent itself as a provider ofe-commerce technology, as opposedto a marketplace where retailers cansell their goods through Amazon’sflagship Web site.Not only does Amazon providethird-party e-commerce services tolarge chain-store retailers, such asTarget Corp., and the tools to smallerretailers to create their own Webstores, but it also supplements itsretail technology with payment applicationsthrough Amazon Payments,introduced last year.The latest entry in payments fromAmazon is Amazon Mobile PaymentsService, which includes Amazon’s“1 Click” checkout service that enablesconsumers to pay with a single clickon their mobile devices after theirfirst purchase. Kansas City, Mo.-basedHandmark Inc., a creator of applicationsand services for mobile devices,began using it in early October.While Amazon declines to revealhow many consumers have signedup for its Mobile service, the company’scustomer base, 94 million strong,provides a large pool of consumerson which to draw as the burgeoningmobile-payments channel grows.In February, Amazon.com commerciallyrolled out its Flexible PaymentsService (FPS). The commercialversion of FPS, which is intended formerchants that want to build theirown payments system, includes somenew features aimed at easing adoption,including so-called Quick Startprogramming that allows developersto more quickly integrate the paymentsprogram into their Web sites.Like the beta version, introducedin 2007, the commercial service alsofeatures a micropayments capabilitythat aggregates transactions but letsmerchants track discrete payments.‘Good Interest’If Amazon’s bid to provide a paymentsplatform is successful, merchantsinside the Amazon ecosystemmay never have a reason to leave it.“Amazon wants to provide theentire Web-based infrastructure formerchants,” says BetterBuyDesign’sMott. “There are a lot of merchants thatcan be helped by associating with Amazon,and that is a powerful attraction.”One incentive for merchants toadopt FPS is price. Amazon Paymentstransfers cost 1.5% plus a penny;automated clearing house debits are2% plus a nickel; and the fee forpayments backed by credit cards is2.9% plus 30 cents. This pricing comparesfavorably with that of PayPal,which enables card, ACH, and prepaidtransactions, and Google Checkout,Hylen: Smallbusinesses arethe “last largebastion of checkpayments.”whose e-wallet feature for now allowsonly credit card charges.For transactions under $10, Amazon’scredit card fee rises to 5% plusa nickel, and for Amazon Paymentsbalance transfers of less than a nickel,a fee of 20%, with a minimum fee ofa quarter of a cent, is levied.“We have had good interest fromdevelopers and entrepreneurs that likethe flexibility of FPS,” says Mark Stabingas,vice president of Amazon Payments.“We have thought of ourselves asan e-commerce and technology [company]for several years now that wantsto enable payments for startup companiesand build payment value by makingpayments as flexible as possible.”One question that keeps poppingup: Since Amazon is the largest onlinemerchant, will other merchants viewit as a competitor? “Some large merchantsmay hesitate to adopt Amazon’spayments platform, but small and midsizemerchants are in a less competitiveposition and can benefit greatly fromaccess to the largest customer base onthe Internet,” says Ed Kountz, a senioranalyst at Forrester Research Inc.Stabingas says that Amazon hasa track record of exposing its technologicalassets and capabilities to othermerchants. “If what we have to offer30 digitalDecember 2009
is of value, other merchants will workwith us,” he says. “Part of the strategybehind FPS is to allow developers toincorporate it in their applications inways we never thought about.”Intuit’s B2B PlayMountain View, Calif.-based IntuitInc.’s payments strategy is more onthe business-to-business side of theledger. The software company, makerof accounting applications Quicken,QuickBooks, and TurboTax, is movingdeeper into B2B payments as a way toexpand its commercial customer base.“There is a need for small businessesto accept and make paymentselectronically,” says Chris Hylen, vicepresident of growth for Intuit’s paymentdivision. “We already have relationshipswith small business throughour applications and we see our paymentnetwork as an extension of, anda way to grow, those relationships.”In August, Intuit began testing IntuitPaymentNetwork for B2B payments.Intuit PaymentNetwork charges a flat50 cents per transaction, with no setupfee or other costs. Intuit expects manyof the transactions initiated over IntuitPaymentNetwork will be e-checks.If that’s true, Intuit Payment-Network will dovetail nicely intothe company’s check processor ElectronicClearing House, a.k.a. ECHO.Intuit purchased ECHO, a processorof Internet and automated clearinghousepayment transactions, abouttwo years ago for $131 million toround out its payment services formerchants with check services.With PaymentNetwork, a supplierincludes a link to a specialPaymentNetwork URL on its invoice.Its customer uses the link to initiate apayment. On the first visit, the customermust create an account, fillingin bank-account data and givingan e-mail address. Transactions settlethrough the ACH, with Intuit takingits fee only when the funds depositinto the supplier’s account.“Small businesses are the last largebastion of check payments becausethey provide a way for small businessesto control their payment flow,”says Hylen. “Businesses using IntuitCheck Solutions can scan checks inQuickBooks and reconcile their ledger.PaymentNetwork provides a wayto initiate an e-check payment to othersin the network.”Intuit’s PayoffAlthough Intuit is primarily focusedon B2B payments, it has ventured intothe consumer side of payments withGoPayment, which works on a mobilephone but doesn’t require other hardware,such as an external card-swipedevice or printer.GoPayment is targeted largely attradesmen, such as plumbers and carpenters,home services such as carpetcleaners, and delivery services,all of which lack a reliable, low-costmethod to accept credit cards at thetime of service.To use GoPayment, merchantsenter card numbers, expiration dates,and other data from the customer’scard into data fields that appear onthe handset screen. A connected cardswipe device isn’t required but willnet merchants a lower card-presentfee. Once a card is swiped, the datafields on the handset screen are automaticallypopulated.Intuit charges a discount fee of1.64% on transactions processed withthe optional card reader. The fee withouta swipe is 2.44%. For loyalty orcorporate cards, however, the fee is3.54% for both card-present and cardnot-presenttransactions.Business owners can manage multipleusers and monitor transactionson a PC through Intuit’s merchantservicecenter. QuickBooks users candownload GoPayment data to theircompany files.“A mobile terminal can cost$1,100 plus a monthly service fee,”says Hylen. “This is a way for mobilemerchants to reduce card-acceptancecosts and get paid faster.”The payoff for Intuit is the opportunityto tie its payments services intoits accounting and personal financial-managementproducts, such asMint.com, which Intuit acquired inSeptember for about $170 million.Mint.com is considered a moreuser-friendly way for consumers totrack personal spending and managefinances than Quicken.‘This is a way for mobilemerchants to reducecard-acceptance costsand get paid faster.’Intuit’s Hylen acknowledges thatconsumer-to-business payments are anatural extension of Mint.com and evenQuicken. But right now the company isnot pursuing any such plans. “We’ll gothere when consumers take us there andthat hasn’t happened yet,” he says.In the meantime, expect Intuit to usepayments as a way to grow its commercialcustomer base. “Intuit’s accountingand personal-finance applicationsget right to the heart of managing cashflow and that sets up a great opportunityto cross-sell and up-sell complementaryproducts like payments,” saysBetterBuyDesign’s Mott. DTdigital31
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